<PAGE>




                     U.S. SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                                    FORM 10-Q

                                   (Mark one)

     [X] QUARTERLY REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES
                              EXCHANGE ACT OF 1934

                  For the quarterly period ended June 30, 2002

                                       OR

     [_] TRANSITION REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES
                              EXCHANGE ACT OF 1934

                         Commission file number: 1-10938

                                SEMX CORPORATION
                                ----------------
             (Exact Name of Registrant as specified in its charter)


                   DELAWARE                            13-3584740
         (State or other jurisdiction of               (IRS Employer
         incorporation or organization)           Identification Number)

                    1 LABRIOLA COURT, ARMONK, NEW YORK 10504
          (Address of principal executive offices, including zip code)


                                 (914) 273-5500
              (Registrant's telephone number, including area code)

Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the Registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.

                               (1) Yes [X] No [ ]

                               (2) Yes [X] No [ ]


The number of shares outstanding of the Registrant's sole class of common stock,
as of August 7, 2002 was 6,330,703 shares.




<PAGE>


                                TABLE OF CONTENTS



PART I.  FINANCIAL INFORMATION

<TABLE>
<CAPTION>
                                                                                           Page No
                                                                                           -------
         <S>                                                                                <C>
                  Independent Accountant's Report                                            3

                  Consolidated Balance Sheets at
                  June 30, 2002 (unaudited) and December 31, 2001                            4

                  Consolidated Statements of Operations for the three and six
                  months ended June 30, 2002 and 2001 (unaudited)                            5

                  Consolidated Statements of Cash Flows for the six
                  months ended June 30, 2002 and 2001 (unaudited)                            6

                  Notes to Consolidated Financial Statements                                7-10

Item 2.           Management's Discussion and Analysis of Financial
                  Condition and Results of Operations                                      11-17

PART II                  OTHER INFORMATION

Item 6.                  Exhibits                                                            18

                         Signatures                                                          18
</TABLE>

FORWARD LOOKING INFORMATION

Portions of the narrative set forth in this document that are not historical in
nature may be forward-looking statements. These forward-looking statements speak
only as of the date of this document, and the Company expressly disclaims any
obligation or undertaking to publicly release any updates or revisions to any
forward-looking statements contained herein. The Company's actual performance
may differ materially from that contemplated by the forward-looking statements
as a result of a variety of factors that include, but are not limited to, the
general economic or business climate, business conditions of the electronic,
microelectronic and semiconductor markets and the automotive and communications
industry which the Company serves, the disposition of the remaining discontinued
operation and the economic volatility in geographic markets, such as Asia and
the ability of the Company to meet its capital requirements and to maintain
compliance with NASDAQ listing qualifications.



                                      -2-
<PAGE>



INDEPENDENT ACCOUNTANT'S REPORT

To the Board of Directors
SEMX Corporation

We have reviewed the accompanying consolidated balance sheet of SEMX Corporation
and Subsidiaries as of June 30, 2002, and the related consolidated statements of
operations for the three-month periods and the six-month periods ended June 30,
2002 and 2001 and cash flows for the six-month periods ended June 30, 2002 and
2001. These financial statements are the responsibility of the Company's
management.

We conducted our reviews in accordance with standards established by the
American Institute of Certified Public Accountants. A review of interim
financial information consists principally of applying analytical procedures to
financial data and making inquiries of persons responsible for financial and
accounting matters. It is substantially less in scope than an audit conducted in
accordance with generally accepted auditing standards, the objective of which is
the expression of an opinion regarding the consolidated financial statements
taken as a whole. Accordingly, we do not express such an opinion.

Based on our reviews, we are not aware of any material modifications that should
be made to the accompanying consolidated financial statements for them to be in
conformity with generally accepted accounting principles.

We have previously audited, in accordance with auditing standards generally
accepted in the United States of America, the consolidated balance sheet as of
December 31, 2001, and the related consolidated statements of operations,
shareholders' equity and cash flows for the year then ended (not presented
herein); and in our report dated January 29, 2002, except for Note 3, as which
the date is February 28, 2002 and Note 11 as it relates to Redeemable Preferred
Stock, as to which date is March 29, 2002, we expressed an unqualified opinion
on those consolidated financial statements. In our opinion, the information set
forth in the accompanying condensed consolidated balance sheet as of December
31, 2001, is fairly stated, in all material respects, in relation to the
consolidated balance sheet from which it has been derived.

The accompanying consolidated financial statements have been prepared assuming
that the Company will continue as a going concern. As discussed in Note 2 to the
consolidated financial statements, the Company has suffered recurring losses
from operations, has a working capital deficiency, has a gold consignment
lending agreement which expires on September 16, 2002, has a banking arrangement
that expires on October 31, 2002 for which an extension or replacement financing
has not yet been secured, and the Company's preferred shareholder currently has
the ability to redeem the preferred stock for cash effective April 3, 2003 in an
amount that would exceed available funds. These factors raise substantial doubt
about the Company's ability to continue as a going concern. Management's plans
in regard to these matters are also described in Note 2. The accompanying
consolidated financial statements do not include any adjustments that might
result from the outcome of this uncertainty.

GOLDSTEIN GOLUB KESSLER LLP
New York, New York

July 24, 2002



                                      -3-
<PAGE>


PART I - FINANCIAL INFORMATION
ITEM 1.  FINANCIAL STATEMENTS

                        SEMX CORPORATION AND SUBSIDIARIES
                           CONSOLIDATED BALANCE SHEETS
                 (DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

<TABLE>
<CAPTION>
                                                                                             June 30, 2002
                                                                                               Unaudited             December 31,
                                                                                               ---------                 2001
                                                                                          --------------------     -----------------
<S>                                                                                           <C>                      <C>
ASSETS
Current Assets:
   Cash and cash equivalents                                                                  $     381                $     395
   Accounts receivable, less allowance for doubtful accounts of $ 588 and $ 857,
     respectively                                                                                 4,603                    3,415
   Inventories                                                                                    5,416                    5,629
   Assets attributable to discontinued operations, at net realizable value                          350                    5,512
   Escrow receivable                                                                                300                        -
   Income tax refunds receivable                                                                  1,418                    1,745
   Prepaid expenses and other current assets                                                        678                      817
   Deferred income tax assets                                                                     1,506                    1,270
                                                                                          --------------------     -----------------
TOTAL CURRENT ASSETS                                                                             14,652                   18,783
                                                                                          --------------------     -----------------
   Property, Plant and Equipment, net                                                            21,405                   22,674
                                                                                          --------------------     -----------------
OTHER ASSETS
   Net non-current assets attributable to discontinued operations                                     -                      600
   Goodwill                                                                                       1,514                    1,514
   Technology rights and intellectual property                                                    1,486                    1,574
   Deferred income tax asset                                                                      1,819                    2,351
   Other                                                                                            399                      705
                                                                                          --------------------     -----------------
TOTAL OTHER ASSETS                                                                                5,218                    6,744
                                                                                          --------------------     -----------------
TOTAL ASSETS                                                                                  $  41,275                $  48,201
                                                                                          ====================     =================
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
   Accounts payable                                                                           $   4,017                $   3,390
   Accrued expenses                                                                               2,259                    1,907
   Accrued Obligation to Repurchase Warrants issued to Preferred Shareholders                     3,175
   Current portion of long-term debt and short term obligations                                   5,723                    8,147
   Current portion of obligations under capital leases                                            1,766                    1,778
                                                                                          --------------------     -----------------
TOTAL CURRENT LIABILITIES                                                                        16,940                   15,222
                                                                                          --------------------     -----------------
Long-term debt                                                                                    2,414                    2,420
Non-current portion of obligations under capital leases                                           2,694                    3,172
                                                                                          --------------------     -----------------
TOTAL LIABILITIES                                                                                22,048                   20,814
                                                                                          --------------------     -----------------
Redeemable Preferred Stock:
Preferred stock - $.10 par value; authorized 1,000,000 shares;
   designated as Series B Preferred Stock: $100 stated value, 100,000 shares issued and
   outstanding                                                                                    9,103                    9,283
Commitments and Contingencies
Common Shareholders' Equity:
   Common stock-$.10 par value; authorized 20,000,000 shares, issued 6,668,503 and
   6,663,503 shares, respectively                                                                   667                      666
   Additional paid-in-capital                                                                    30,453                   30,136
   Accumulated other comprehensive income                                                             4                       25
   Accumulated deficit                                                                          (20,781)                 (12,504)
                                                                                          --------------------     -----------------
TOTAL                                                                                            10,343                   18,323
                                                                                          --------------------     -----------------
Less: Treasury stock: 337,800 shares at cost                                                       (219)                    (219)
                                                                                          --------------------     -----------------
TOTAL COMMON SHAREHOLDERS' EQUITY                                                                10,124                   18,104
                                                                                          --------------------     -----------------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY                                                    $  41,275                $  48,201
----------------------------------------------------------------------------------------- ====================     =================
</TABLE>

                 See Notes to Consolidated Financial Statements.


                                      -4-
<PAGE>


                        SEMX CORPORATION AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF OPERATIONS
                                   (UNAUDITED)
                    (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)


<TABLE>
<CAPTION>
                                                                        For The Three Months Ended       For The Six Months Ended
                                                                                June 30,                        June 30,
                                                                        2002             2001             2002            2001
                                                                     ------------    -------------    -------------     -----------
<S>                                                                   <C>              <C>              <C>             <C>
Net Sales                                                             $    8,239       $   11,219       $   15,333      $   25,374

Cost of Goods Sold                                                         7,219            8,090           14,199          18,947
                                                                     ------------    -------------    -------------     -----------

Gross Profit                                                               1,020            3,129            1,134           6,427

Selling, General and Administrative Expenses                               2,276            2,942            5,246           6,095
                                                                     ------------    -------------    -------------     -----------

Operating Income (Loss)                                                   (1,256)             187           (4,112)            332

Interest Expense                                                            (244)            (325)            (561)           (634)
                                                                     ------------    -------------    -------------     -----------

Loss from Continuing Operations Before Income Tax Benefit                 (1,500)            (138)          (4,673)           (302)

Income Tax Benefit                                                             -              (62)               -            (128)
                                                                     ------------    -------------    -------------     -----------

Loss From Continuing Operations                                           (1,500)             (76)          (4,673)           (174)

DISCONTINUED OPERATIONS:

Loss From  Discontinued  Operations,  net of tax benefit and minority
interest                                                                       -             (608)               -            (653)
                                                                     ------------    -------------    -------------     -----------

NET LOSS                                                                  (1,500)            (684)          (4,673)           (827)

Preferred Stock Dividends, Accretion and Warrant repurchase
obligation                                                                 3,403              201            3,604             402
                                                                     ------------    -------------    -------------     -----------

Net Loss Attributable to Common Shareholders                         $    (4,903)     $      (885)     $    (8,277)      $  (1,229)
                                                                     ============    =============    =============     ===========

Net Loss per Common Share - Basic and Diluted

Net Loss from Continuing Operations                                  $     (.77)      $     (.04)      $    (1.31)       $    (.09)
Net Loss from Discontinued Operations                                $         -      $     (.10)      $         -       $    (.10)
                                                                     ------------    -------------    -------------     -----------

Net Loss Per Common Share                                            $     (.77)      $     (.14)      $    (1.31)       $    (.19)
                                                                     ============    =============    =============     ===========

Weighted Average Number of Common
Shares Outstanding
Basic and Diluted                                                          6,329            6,324            6,329            6,321
</TABLE>

                 See Notes to Consolidated Financial Statements


                                      -5-
<PAGE>


                        SEMX CORPORATION AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                                   (UNAUDITED)
                             (DOLLARS IN THOUSANDS)

<TABLE>
<CAPTION>
                                                                                                        For The Six Months
                                                                                                          Ended June 30,
                                                                                                     2002                2001
                                                                                                     ----                ----
<S>                                                                                                    <C>                 <C>
Cash flows from operating activities:
   Net Loss                                                                                        $  (4,673)          $    (827)
     Adjustments to reconcile net loss to net
       cash provided by (used in) operating activities:
       Depreciation and amortization of property and equipment                                         1,904               3,419
       Other amortization                                                                                174                 493
       Deferred income taxes                                                                               -                 (51)
       Minority interest                                                                                   -                 (49)
     Changes in operating assets and liabilities:
       (Increase) decrease in accounts receivable                                                     (1,188)              2,726
       (Increase) decrease in inventories                                                                213                (674)
       (Increase) decrease in prepaid expenses and other current assets                                  139                (416)
       Increase in escrow receivable                                                                    (300)                  -
       Decrease in tax refund receivable                                                                 623                   -
       Increase in accounts payable                                                                      627                 162
       Increase (decrease) in accrued expenses                                                            52                (511)
       Decrease in income taxes payable                                                                    -                (127)
                                                                                                ----------------    ---------------

     NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES                                              (2,429)              4,145
                                                                                                ----------------    ---------------

Cash flows from investing activities:
   Purchase of property and equipment                                                                   (505)             (3,273)
   Net proceeds from sale of subsidiary and assets, excluding escrowed cash                            5,780                   -
   (Increase) decrease in other assets                                                                   181                (354)-
                                                                                                ----------------    ---------------
     NET CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES                                               5,456              (3,627)
                                                                                                ----------------    ---------------

Cash flows from financing activities:
   Proceeds from exercise of stock options                                                                 8                  36
   Proceeds from long-term debt and short-term obligations                                               156               1,447
   Repayments of long-term debt and short-term obligations                                            (1,708)               (916)
   Borrowings (repayments) under revolving credit facilities                                            (878)                141
   Payments under capital leases                                                                        (619)             (1,266)
   Payments of Series B Preferred Stock Dividends                                                          -                (299)
                                                                                                ----------------    ---------------

NET CASH USED IN FINANCING ACTIVITIES                                                                 (3,041)               (857)
                                                                                                ----------------    ---------------

Effect of exchange rate change on cash                                                                     -                (159)

Net decrease in cash and cash equivalents                                                                (14)               (498)
Cash and cash equivalents at beginning of period                                                         395               1,300
                                                                                                ----------------    ---------------
Cash and cash equivalents at end of period                                                         $     381           $     802
                                                                                                ================    ===============

SUPPLEMENTAL SCHEDULE OF NONCASH INVESTING AND FINANCING ACTIVITY:

     Machinery and equipment, net of trade-in, acquired under capital leases                       $     129           $     376

                 See Notes to Consolidated Financial Statements
</TABLE>


                                      -6-
<PAGE>


                        SEMX CORPORATION AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                             (DOLLARS IN THOUSANDS)
                                   (UNAUDITED)

NOTE 1.  BASIS OF PRESENTATION

The consolidated financial statements include the accounts of SEMX Corporation
("SEMX") and its wholly and majority owned subsidiaries. As used herein, the
term "Company" refers to SEMX, its predecessors and its subsidiaries unless the
context indicates otherwise. The Consolidated Balance Sheet at June 30, 2002 and
the Consolidated Statements of Operations for the three and six months ended
June 30, 2002 and 2001 and the Consolidated Statements of Cash Flows for the six
months ended June 30, 2002 and 2001, have been prepared by the Company and are
unaudited. In the opinion of management, the financial statements reflect all
adjustments necessary to present fairly the results for the interim periods.
Such results are not necessarily indicative of results to be expected for the
full year. The Consolidated Balance Sheet at December 31, 2001 has been derived
from the audited financial statements at that date. These financial statements
should be read in conjunction with the Company's Annual Report on Form 10-K for
the year ended December 31, 2001. The financial statements included herein for
the three and six month periods ended June 30, 2002 and 2001 have been reviewed
in accordance with Statement on Auditing Standards No. 71 "Interim Financial
Information" by the Company's independent accountants.

In conjunction with a strategy to focus on its core business, in the fourth
quarter of 2001 the Company's Board of Directors made a decision to discontinue
the operations of its Wafer Reclaim Services Group. The Company's Wafer Reclaim
Services Group reclaimed silicon test wafers for the semiconductor industry
through facilities located in North America, Europe and Asia. The Company
completed the sale of the assets and selected liabilities of its North American
operations ("ASP US") on February 28, 2002. In addition, the Company completed
the sale of the stock of its European operation ("ASP BV") on May 2, 2002.
Accordingly, as of December 31, 2001 SEMX operates in one principal segment:
Microelectronic Packaging and Materials. The Microelectronic Packaging and
Materials Group includes the Company's Semiconductor Packaging Materials Co.
("SPM") division and related overseas operations and its wholly owned
subsidiary, Polese Company, Inc. ("Polese"). For comparability, certain 2001
amounts have been reclassified, where appropriate, to conform to the financial
statement presentation used in 2002, including the adjustments necessary to
conform to the discontinued operations presentation of the Wafer Reclaim
Services Group during 2001.

The Company has not recorded an income tax benefit for its operating loss
incurred during the period due to uncertainty about future utilization of such
loss. Accordingly, no additional income tax benefits are included for the three
and six months ended June 30, 2002. However, if future profits are recognized,
the Company will not include a tax expense thereon until the excluded benefits
are fully utilized. The federal tax related valuation allowance against the
Company's deferred tax asset increased by approximately $1,589 for the six
months ended June 30, 2002 and $639 for the three months ended June 30, 2002.

In June 2001, SFAS No. 142 "Goodwill and Other Intangible Assets," was
issued. SFAS No. 142 is required to be applied for fiscal years beginning after
December 15, 2001. The Company adopted SFAS No. 142 as of January 1, 2002. SFAS
No. 142 eliminates the amortization of goodwill and certain other intangible
assets. It also requires a test for impairment of these assets at least
annually, as well as a transitional goodwill impairment test within six months
from the date of adoption. In accordance with the transitional impairment test
the Company has completed its initial assessment of fair value of its business
units. The testing indicates the net book carrying value is in excess of the
fair values of one of its business units which is an indicator that there may be
impairment present. The Company plans to complete the impairment test, which
will measure the amount of impairment loss, if any, during the second half of
2002 and will at that time, record any resultant impairment as a cumulative
effect of a change in accounting principle. SFAS No. 142 also requires
disclosure of what net income (loss) would have been in all periods presented
had SFAS No. 142 been in effect. The following table is provided to disclose
what net loss would have been had SFAS No. 142 been adopted in the prior period:


                                      -7-
<PAGE>


<TABLE>
<CAPTION>
                                                                     For the Three Months Ended        For the Six Months Ended
                                                                              June 30,                         June 30,
                                                                       2002            2001               2002           2001
                                                                   --------------  --------------     -------------  ------------
<S>                                                                 <C>             <C>                <C>            <C>
Reported loss from continuing operations                            $   (1,500)     $      (76)        $   (4,673)    $     (174)
Add back: Goodwill  amortization from continuing  operations,
net of tax benefit                                                           -              24                  -             48
                                                                   --------------  --------------     -------------  ------------
Adjusted loss from continuing operations                                (1,500)            (52)            (4,673)          (126)
                                                                   --------------  --------------     -------------  ------------
   Loss from discontinued operations                                         -            (608)                 -           (653)
   Add back: Goodwill amortization from discontinued
   operations, net of tax benefit                                            -              63                  -            128
                                                                   --------------  --------------     -------------  ------------

Adjusted net loss                                                       (1,500)           (597)            (4,673)          (651)
Preferred Stock Dividends and Accretion                                  3,403             201              3,604            402
                                                                   --------------  --------------     -------------  ------------

Net loss attributable to common shareholders                        $   (4,903)     $    (798)         $   (8,277)    $   (1,053)
                                                                   ==============  ==============     =============  ============

Net loss per common shares basic and diluted
   Adjusted net loss from continuing operations                     $    (.77)      $    (.04)         $   (1.31)     $    (.08)
   Adjusted net loss from discontinued operations                   $        -      $    (.09)         $        -     $    (.09)
                                                                   --------------  --------------     -------------  ------------
   Adjusted net loss per common share                               $    (.77)      $    (.13)         $   (1.31)     $    (.17)
                                                                   ==============  ==============     =============  ============
</TABLE>

The Company does not believe that any other recently issued but not yet
effective accounting standards will have a material effect on the Company's
consolidated financial position or results of operations.

NOTE 2.  FINANCIAL RESULTS AND LIQUIDITY

The Company's independent public accountants have included a going concern
explanatory paragraph in their review report accompanying the June 30, 2002
unaudited consolidated financial statements. The paragraph states that the
Company's recurring losses, working capital deficiency, gold consignment
agreement, short-term debt maturities and Preferred Stock redemption
requirements raise substantial doubt about the Company's ability to continue as
a going concern. The report identifies the fact that the financial statements do
not include adjustments that might result from the outcome of this uncertainty.

The Company's continuing operations incurred net losses of $4,866 during the
year ended December 31, 2001 and $4,673 during the six months ended June 30,
2002, of which $1,500 was incurred in the quarter ended June 30, 2002. These
results are primarily attributable to the decline in the telecommunications and
other markets that the Company serves, and the continuing slower than expected
economic recovery experienced during 2002.

Despite passing through the low point in the Company's revenues during December,
2001, the Company has experienced continued softness in its markets from
historical levels, with first six months 2002 revenues declining 39.6% from the
first half of 2001 levels and second quarter 2002 revenues declining 26.6% from
last years second quarter. Although the Company has initiated various cost
reduction programs including headcount reductions, salary freezes, utility
supply contracts, shifting production overseas and management pay cuts in
response to the sharp declines in revenues, the Company's fixed manufacturing
and facilities costs are such that profitability was not achieved in these
periods. However, the Company was successful in reducing its 2002 losses from
first quarter levels of $3,173 to a loss of $1,500 in the second quarter, most
of which was incurred in April. In addition, the Company has as of June 30, 2002
reduced its borrowings and capital lease obligations by approximately $2,900
from beginning of year levels.

The Company may need additional cash to meet its working capital needs until
revenues increase and a return to profitability is achieved. The Company's
revolving credit facility, which expires on October 31, 2002, is
collateralized by the Company's eligible accounts receivable and inventory. Due
to revenue declines during 2002, the Company's eligible accounts receivable and
inventory have decreased thereby limiting the Company's ability to borrow under
its credit facilities. Further, the Company has a gold consignment lending
agreement that provides for the supply of gold used in the Company's
manufacturing process, which expires on September 16, 2002. While there is no
assurance that funding will be available to support future liquidity needs, the
Company is in preliminary discussions with lenders to refinance its existing
credit facilities prior to the October 31, 2002 expiration date and may be in a
better borrowing position due to reductions of $2,900 in bank and capital lease
obligations.

                                      -8-
<PAGE>


The Company's Series B Preferred Stock Agreements contain a provision that
currently allows the preferred shareholder to redeem the stock for cash on April
3, 2002. In addition, the Warrant repurchase formula would require an additional
amount, currently $3,175, to be paid to the shareholders on January 3, 2003 if
the Company's common stock does not trade at $5.00 for 20 consecutive trading
days during the remainder of 2002, or in the event of a bankruptcy or change in
control. This amount has been accrued at June 30, 2002. In the event that both
short and long-term support from its current lenders and Preferred Stock
investors or replacement lenders is not available, the Company is exploring
alternatives. The Company has hired professional advisors to assist with these
efforts that could include, but are not limited to, strategic combinations,
additional equity investors, alternative lenders, and selling substantially all
of the Company assets.

The Company has received a notification from the NASDAQ Stock Market that is out
of compliance with NASDAQ National Marketplace rules and subject to commencement
of delisting proceedings on October 22, 2002. The Company is considering
transferring to the NASDAQ SmallCap market, prior to any delisting proceedings
and believes it could qualify its stock to trade on the SmallCap market. Should
the Company be unable to successfully appeal National Market delisting
proceeding action or effect a transfer to the Small Cap market, the liquidity of
its Common Stock could be substantially diluted and the ability to raise common
equity may be impaired.

Management believes that despite the financial uncertainties going forward it
has valuable manufacturing processes and technology and that it is capable of
profitability provided that sufficient liquidity is preserved. The support of
the Company's vendors, customers, lenders, investors, stockholders and employees
will continue to be essential to the Company's future success.

NOTE 3.  LOSS PER SHARE

Basic loss per share is computed based on the weighted average number of common
shares outstanding during the period. Net loss attributable to common
shareholders reflects preferred stock dividends and the accretion of related
costs on the Company's Redeemable Preferred Stock issued on June 1, 2000,
including the accrual of costs related to a preferred stock warrant repurchase
agreement. Common stock equivalents have been omitted as their inclusion would
be antidilutive.

NOTE 4.  DISPOSITIONS

The Company completed the sale of the assets of its ASP US business on February
28, 2002 for gross proceeds of approximately $6,100 and the assumption of
certain liabilities. In conjunction with the sale the purchaser held $300 in
escrow subject to the absence of certain conditions as defined in the sale
agreement and the resolution of any adjustments for changes in working capital
between the letter of intent signing and the February 28, 2002 closing date.
$1,300 of the proceeds was used to pay down the Company's term debt outstanding
under the PNC Credit Facility and the balance, after severance and professional
fees, was used to pay the revolving credit borrowings.

The Company completed the sale of the stock of its Netherlands based ASP BV
subsidiary on May 2, 2002 for gross proceeds of $1,167 and the assumption of
certain liabilities of the business. The balance of the proceeds, after closing
costs, were used to pay down revolving credit borrowings.


                                      -9-
<PAGE>


NOTE 5.  INVENTORY

Inventories consisted of the following:

                          June 30, 2002         December 31,
                           (Unaudited)              2001
                         -----------------    -----------------

Raw materials               $  2,781             $  2,574
Work-in-process                1,562                1,851
Finished goods                 1,073                1,204
                         -----------------    -----------------
                            $  5,416             $  5,629
                         =================    =================

The Company has a consignment arrangement with a bank, as described in
Management's Discussion and Analysis, which provides for the leasing of precious
metals by the Company. The Company pays for these precious metals based on
actual usage.

NOTE 6.  DISCONTINUED OPERATIONS

During the fourth quarter of 2001, the Company's Board of Directors made a
decision to discontinue the operations of its Wafer Reclaim Services Group.
Accordingly, the Company reported the results of operations of the Wafer Reclaim
Services Group as discontinued operations and made an accrual as of December 31,
2001 of the expected loss on disposal and anticipated operating losses of the
Wafer Reclaim Services Group business units through the date of disposal.

On February 28, 2002, the Company completed the sale of the assets of its Wafer
Reclaim Services Group's ASP US subsidiary and on May 2, 2002, the Company
completed the sale of the stock of its Netherlands-based ASP B.V. subsidiary.
The cash proceeds of these sales (See Footnote 3, Dispositions) were credited to
the net current assets attributable to discontinued operations. The Company is
in discussions regarding alternatives for its 50.1% interest in its
Singapore-based ISP business unit.

During the three and six months, respectively ended June 30, 2001, the
Discontinued Wafer Reclaim Services Group recorded service revenues of $4,044
and $9,312, respectively and realized a net loss after tax benefits of $608 and
$653, which is recorded as Loss from Discontinued Operations on the accompanying
Statement of Operations. During the three and six months ended June 30, 2002,
the Wafer Reclaim Services Group recorded service revenues of $1,104 and $3,996
and had no net loss because the estimated loss from the Wafer Reclaim Services
Group operations and disposal was recorded at December 31, 2001.

On the accompanying balance sheet, the remaining net assets attributable to
discontinued operations relate to ISP and are classified as a current asset.


                                      -10-
<PAGE>


ITEM 2.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
         RESULTS OF OPERATIONS

Prior to the fourth quarter of 2001, the Company operated in two business
segments: the Microelectronic Packaging and Materials Group and the Wafer
Reclaim Services Group. In conjunction with a strategy to focus on its core
business, during the fourth quarter of 2001, the Company's Board of Directors
made a decision to discontinue the operations of its Wafer Reclaim Services
Group. The accompanying Financial Statements have been reclassified to segregate
the Discontinued Operations results from the continuing Microelectronic
Packaging and Materials Group operating results. Accordingly, most of the
discussion herein will focus on the continuing operations of the Microelectronic
Packaging and Materials Group as the Company's remaining business.

RESULTS OF OPERATIONS - SECOND QUARTER AND FIRST SIX MONTHS 2002 COMPARED TO
SECOND QUARTER AND FIRST SIX MONTHS 2001

REVENUE:

Total revenue for the second quarter 2002 of $8,239,000 decreased by $2,980,000
or 26.6% as compared to the second quarter 2001, reflecting reduced customer
requirements in the electronics sectors that the Group serves. SPM's second
quarter 2002 sales decreased slightly by $49,000 or 1.4 % as compared to the
comparable 2001 period, reflecting market conditions and decreased gold wire
sales, although sales were stronger at the overseas locations. Polese Company's
second quarter 2002 sales decreased by $2,931,000 or 38.6% as compared to the
prior year period reflecting market conditions, particularly in the
telecommunications industry. Total revenue for the first six months 2002 of
$15,333,000 decreased by $10,041,000 or 39.6% as compared to the prior years
period, which reflected strong first quarter 2001 revenues.

During the second quarter of 2002, the Company has experienced continued
strengthening in the electronics industry markets from first quarter 2002 sales
levels of $7,094,000 and fourth quarter 2001 sales levels of $5,336,000 which
was the low point of its recent quarterly revenue levels.

The Company does a significant amount of international business, both from its
domestic locations, as well as through overseas manufacturing locations.
Domestic and international sourced sales of the Company's products into foreign
markets, as a percentage of consolidated revenue during the first half of 2002
was 44.9%, as compared to 23.3% for the first half of 2001. This compares to a
domestic and international sourced sales percentages of 51.4% for the second
quarter 2002 and 31.1% for the second quarter 2001. Domestically sourced sales
of the Company's products into foreign markets, as a percentage of consolidated
revenue during the first half of 2002 was 33.2%, as compared to 19.7% for the
first half of 2001. This compares to domestically sourced sales percentages of
37.9% for the second quarter 2002 and 26.3% for the second quarter 2001. The
majority of domestically sourced foreign sales contracts are written in US
dollars with payment remitted directly in US dollars. Therefore, there is a
reduced risk of currency exposure.

The Company has foreign manufacturing in Morocco, Semiconductor Materials
S.A.R.L. ("S.A.R.L."), and in Malaysia, SPM(M) SDN.BHD and SPM Tape and Reel
Industries (M)SDN.BHD ("SPMT&R(M)"). During the second quarter of 2002, the
Company derived revenue from S.A.R.L. of $785,000, from SPM(M) of $304,000 and
from SPMT&R(M) of $23,000. During the first half of 2002, the Company derived
revenue from S.A.R.L. of $1,249,000, from SPM(M) of $519,000 and from SPMT&R(M)
of $23,000. Sales for these locations are conducted in the local currencies of
Dirhams and Ringits, which constitute a foreign sales percentage of 11.7% and
3.7% for the first half of 2002 and 2001, respectively. This compares to foreign
sales percentage of 1.2% for the second quarter 2002 and 1.8% for the second
quarter 2001. These sales are subject to currency fluctuations, although
exchange rate fluctuations have not historically been large during the periods
the Company has operated in these jurisdictions.

The Company's consolidated backlog as of June 30, 2002 was approximately
$12,120,000 compared to a backlog of approximately $19,498,000 at June 30, 2001
and $12,980,000 at December 31, 2001. The decrease in consolidated


                                      -11-
<PAGE>


backlog from the prior year period and December 31 period was primarily due to a
softening in the telecommunications markets, and a change of one of the
Company's largest customers to a different ordering system, partially offset by
a strengthening in the backlog of orders for wire and precision stampings during
2002. The Company believes the majority of the consolidated backlog at June 30,
2002 includes orders that are expected to be shipped within one year.

GROSS PROFIT:

Gross profit of $1,020,000 for the second quarter 2002 decreased by $2,109,000,
or 67.4%, from the second quarter 2001. The Microelectronic Packaging Group's
gross profit decrease primarily reflects operating its manufacturing facilities
at a level which exceeded that necessary to generate the revenue earned in the
period. As a result of the above, the Microelectronic Packaging Group's gross
margin decreased from 27.9% in last years second quarter to 12.4% in the second
quarter 2002. Gross profit of $1,134,000 for the first six months 2002 decreased
by $5,293,000, or 82.4%, from the first six months 2001. The Microelectronic
Packaging Group's gross margin decreased from 25.3% in last years first six
month period to 7.4% in the first six months of 2002 for reasons outlined above.
The Company noted a 2002 quarter to quarter improvement in gross margins from
1.6% in the first quarter to the aforementioned 12.4% in the second quarter, as
sales levels continued to increase from the fourth quarter 2001 levels. The
Microelectronic Packaging Group's gross profit for the first six months of 2001
reflects the write off during the quarter of approximately $326,000 of inventory
damaged as a result of the ammonia release and accompanying disruptions in
production.

SELLING, GENERAL AND ADMINISTRATIVE:

Selling, general and administrative ("SG&A") expenses in the second quarter 2002
decreased by $666,000, or 22.6% from the comparable 2001 period. SG&A expenses
in the first six months of 2002 decreased by $849,000, or 13.9% from the
comparable 2001 period. The decrease in SG&A during the second quarter and first
six months of 2002 was due to cost reductions, volume reductions. SG&A expenses
as a percentage of revenue increased from 26.2% in the second quarter 2001 to
27.6% for the second quarter 2002 due the reduction in sales. SG&A expenses as a
percentage of revenue increased from 24.0% in the first six months 2001 to 34.2%
for the first six months 2002, reflecting the reduction in sales.

INTEREST EXPENSE (NET):

Net interest expense for the second quarter 2002 decreased by $81,000 from the
second quarter 2001. Net interest expense for the first six months 2002
decreased by $73,000 from the first six months of last year. The slight decrease
in net interest expense is due to reduced levels of bank term and revolving
credit debt, and lower interest rates.

PROVISION (CREDIT) FOR INCOME TAXES:

The Company recorded a credit of $62,000 at an effective rate of 44.9% for the
second quarter of 2001 and a credit of $128,000 at an effective rate of 42.3%
for the first six months 2001. The Company has not recorded a credit for income
tax benefits from continuing operations for an operating loss incurred in the
current period due to uncertainty about future utilization.

NET LOSS:

As a result of the above, the Company had a net loss from continuing operations
of $1,500,000 and $4,673,000 for the second quarter and first six months 2002 as
compared to a net loss from continuing operations of $76,000 and $174,000 for
the second quarter and first six months 2001, respectively. The net loss was
increased by the increase in the valuation allowance against the Company's
deferred tax asset. The federal tax related valuation allowance increased by
approximately $1,589,000 for the six months ended June 30, 2002 and $639,000
for the three months ended June 30, 2002.


                                      -12-
<PAGE>

NET LOSS ATTRIBUTABLE TO COMMON SHAREHOLDERS:

Net loss attributable to common shareholders is the numerator in the Company's
calculation of Basic and Diluted Income per common share and reflects dividends
and the accretion of related costs of the Series B Preferred Stock issued on
June 1, 2000. The Company accrues approximately $76,000 per month representing
dividends payable and accretion related to the Series B Preferred Stock. As of
June 30, 2002 the Company has accrued an additional amount pursuant to a warrant
repurchase formula contained in the Series B Preferred Stock agreement of
$3,175,000 as described in Note 2.


DISCONTINUED OPERATIONS - SECOND QUARTER 2002 COMPARED TO SECOND QUARTER 2001

During the fourth quarter of 2001, the Company's Board of Directors made a
decision to dispose of the Wafer Reclaim Services Group which includes American
Silicon Products ("ASP"), American Silicon Products B.V. ("ASP B.V.") and
Singapore based, International Semiconductor Products Pte. Ltd. ("ISP") business
units. The Wafer Reclaim Services Group's revenues for the second quarter and
six months ended June 30, 2002 were $1,104,000 and $3,996,000 respectively, as
compared to revenues of $4,044,000 and $9,312,000 for the second quarter and six
months of 2001, respectively. The Wafer Reclaim Services Group revenue decrease
for the second quarter and six months ended June 30, 2002 compared to the prior
year periods primarily were due to the sales of ASP and ASP B.V. during the 2002
periods. For the second quarter and first six months of 2001, the Wafer Reclaim
Services Group recognized a net loss from discontinued operations of $608,000
and $653,000, respectively, which were recorded at December 31, 2001. In
February 2002, the Company completed the sale of the assets of the ASP US
business and in May 2002, the Company completed the sale of the ASP BV business
unit as described more fully below in Liquidity and Capital Resources. The
Company is in discussions regarding alternatives for its 50.1% interest in its
Singapore-based ISP business unit.

LIQUIDITY AND CAPITAL RESOURCES:

General

The Company's independent public accountants have included a going concern
explanatory paragraph in their review report accompanying the June 30, 2002
unaudited financial statements. The paragraph states that the Company's
recurring losses, working capital deficiency, gold consignment agreement,
short-term debt maturities and Preferred Stock redemption requirements raise
substantial doubt about the Company's ability to continue as a going concern.
The report identifies the fact that the financial statements do not include
adjustments that might result from the outcome of this uncertainty. The status
of these matters is discussed below and management's plans in regards to these
uncertainties are included in the Outlook section.

On July 24, 2002, management received a letter from the NASDAQ, which stated the
Company's common stock had not maintained the minimum market value of publicly
held shares ("MVPHS") of $5,000,000 and a minimum bid price ("MBP") of $1.00 per
share for the last 30 days as required under NASDAQ Market place rules. The
Company has until October 22, 2002 to regain compliance which is defined as the
MVPHS exceeding $5,000,000 and the MBP exceeding $1.00 for a period of ten
consecutive trading days. If compliance cannot be demonstrated by October 22,
2002, NASDAQ will provide a written notification that the Company's common
stock will be delisted from the NASDAQ National market, at which time the
Company may appeal to a Listing Qualifications Panel. NASDAQ has indicated that
the Company has the option of applying for a transfer to the NASDAQ SmallCap
Market before October 22, 2002 and achieving a stay of delisting proceedings
pending review of the transfer application. Although there can be no assurance
that the Company will regain compliance with the NASDAQ National Market, the
Company believes it can successfully transfer to the NASDAQ SmallCap Market.

To support the Company's growth, the Company has historically made significant
capital expenditures to support its facilities and manufacturing processes as
well as working capital needs. The Company has financed its capital needs
through cash flow from operations, and Preferred Stock, line of credit
facilities, term loans from banks, other bank financing, including gold
consignment supply agreements, and capital leases and common stock issuance. The
Company's revolving credit facilities, which expire on October 31, 2002, are
collateralized by the Company's eligible accounts receivable and inventory. Due
to revenue declines during 2002, the Company's eligible accounts receivable and
inventory have decreased thereby limiting the Company's ability to borrow under
its credit facilities. The ability to issue additional equity may be impacted if
the Company's Common Stock continues to trade below book value, and may result
in additional dilution to current Shareholders. However, at current volume
levels, the Company does not anticipate a need to make significant capital
expenditures over the next twelve months.


                                      -13-
<PAGE>



Summary of 2002 Activity

At June 30, 2002, the Company had cash and cash equivalents of $381,000 and had
an available balance on its revolving credit facility of $596,000 as compared to
$802,000 and $1,503,000 respectively at June 30, 2001.

Net cash used in operating activities in the first six months of 2002 amounted
to a use of $2,429,000 as compared to cash provided of $4,145,000 in the first
six months of 2001. Cash provided by operations decreased compared to the prior
years period, principally as a result of the first six months net loss and
working capital changes.

Cash provided by investing activities amounted to $5,456,000 in the first six of
2002 compared to cash used of $3,627,000, in the prior year period. This change
was principally due to the sale of ASP US and ASP BV. During the three months
ended June 30, 2002 and 2001, the Company invested $505,000 and $3,273,000,
respectively, in property and equipment. This investment excludes $129,000 in
the 2002 period and $ 376,000 in the 2001 period for equipment acquired under
capital leases.

Net Cash used in financing activities amounted to $3,041,000 in the first six
months of 2002 as compared to cash used of $857,000 during the 2001 period.
During the first six month of 2002 the Company repaid $1,708,000 under long-term
debt and short-term obligations and $878,000 under its Bank revolving line of
credit. In addition, the Company made payments of $619,000 under capital lease
obligations.

FEDERAL REFUND AND CARRYBACK CLAIM

Under the Federal Economic Stimulus Act signed into law during 2002, the period
for carrying back losses to generate income tax refunds was extended from three
to five years. During the first six months of 2002 the Company has filed for
$934,000 of refunds and received $455,000 during the period. The balance of the
$934,000 in expected refunds ($478,000) was received in July 2002. In addition,
on August 5, 2002 the Company filed a 2001 Federal income tax return and an
amended carryback claim, generating an expected refund of approximately
$939,000, which the Company expects to receive in September 2002.

CREDIT FACILITIES:

On November 1, 1999, the Company entered into a Revolving Credit, Term Loan and
Security Agreement with the Business Credit section of PNC Bank. The Credit
Facility replaced revolving credit and term loan facilities the Company had with
other banks. The current Credit Facility has a three-year term, which expires on
October 31, 2002. It consists of a formula-based, as amended $5,000,000
revolving credit facility and an original $6,234,000 term loan, that are
collectively secured by substantially all of the Company's domestic assets and
the stock of the Company's foreign subsidiaries. Revolving credit facility
availability of up to S$4,000,000 Singapore dollars (approximately $2,260,000
US) is reserved for issuance of a standby letter of credit in support of the
Company's partial guarantee of ISP's debt. The interest rate on revolving credit
borrowings is, at the Company's option, based on either the prime rate or a
floating Eurodollar rate plus a margin of 2.75%. At the Company's option, the
term loan interest rate is based on either prime plus 0.5% or a floating
Eurodollar rate plus a margin of 3.0%. On July 18, 2002 PNC imposed a 2% per
anum surcharge on the interest rates otherwise in effect under the Credit
Agreement. Principal payments under the $6,234,000 term loan are due in equal
monthly installments of $74,214 over the three-year term. Full payment of
outstanding debt is due on October 31, 2002. In April 2001, the Company entered
into an additional $1,447,000 term borrowing under the PNC facility, subject to
the same terms and amortization as the original term loan. The proceeds from the
term loan were used to pay down an equivalent amount of revolving credit
borrowings. At the February 28, 2002 closing of the sale of the assets of the
ASP US subsidiary, the Company repaid $1,300,000 of the term loan balance and
PNC placed a reserve of $1,200,000 upon the Company's formula-based borrowing
that was reduced to $600,000 during the first quarter of 2002. As of December
31, 2001 and March 31, 2002, the Company was not in


                                      -14-
<PAGE>


compliance with certain financial ratio covenants as defined in the Credit
Facility. PNC waived the covenant violation existing at December 31, 2001 and
March 31, 2002. As of June 30, 2002, the Company was not in compliance with
certain financial ratio covenants as modified previously. As the Revolving
Credit borrowings are classified as Short-term liabilities on the accompanying
balance sheet due to the upcoming maturity on October 31, 2002, the Company has
declined to request a waiver from PNC as of June 30, 2002. The Company is in
preliminary discussions with replacement lenders for the refinance of the PNC
Credit Facility, but there is no assurance that said discussions will be
successful. In the event that the Company is unable to refinance the PNC Credit
Facility, this would materially effect the future operation of the Company. The
Company is current on its payments of all interest and principal under the
Credit Facility.

In December 1996, the Company entered into a consignment agreement (the "Gold
Consignment Agreement") with Fleet Precious Metals ("FPM"), which, as amended,
expires September 16, 2002. Under the Gold Consignment Agreement, the Company
utilizes gold in its manufacturing process. This consigned gold is not owned by
the Company and accordingly is not included in inventory on the accompanying
financial statements. As the Company ships finished goods manufactured with the
consigned gold from FPM, it purchases gold in the open market to replenish the
consignment. The Gold Consignment Agreement, as amended provides for gold on
consignment not to exceed the lesser of 3,355 troy ounces of gold or gold having
a market value of $1,200,000. At June 30, 2002, the Company's obligation under
the Gold Consignment Agreement was approximately 3,776 troy ounces of gold
valued at approximately $1,203,000. The Gold Consignment Agreement requires the
Company to pay a consignment fee, presently at a rate of 10.0% per annum, based
upon the value of all gold consigned to the Company. This consignment fee is
included in interest expense. As of December 31, 2001, the Company was not in
compliance with certain financial ratio covenants. FPM has agreed to waive the
covenant violation existing at December 31, 2001. The Company entered into an
interim amended facility with FPM on July 17, 2002 which provided that
consignment facility be moved to a demand facility, the Company maintains its
owned gold of at least 10% of the consignment, and the Company return $25,000
per week in the form of either cash or Gold to FPM through the August 16, 2002
expiration. In order to provide additional collateral to FPM, the Company issued
a $150,000 standby letter of credit in favor of FPM, and the Company's preferred
stock investors issued a $250,000 standby letter of credit in favor of FPM. On
August 15, 2002 the Company entered into an amended facility with FPM that
extended the expiration date through September 16, 2002, lowered the consignment
levels and required the return of 100 ounces of gold by August 23, 2002, and the
continuation of the $25,000 per week return of gold through expiration. Should
FPM demand return of the consigned gold and the Company be unable to replace the
consignment facility, there would be a material adverse impact to the Company.
The Company is current on its payment of interest on the FPM consignment
interest and is maintaining the required Gold levels under the agreement.

In August, 2000, the Company's 50.1% owned ISP subsidiary refinanced its
existing debt and entered into a credit facility with Keppel Tatlee Bank. The
facility provides for a total of S$11,950,000 (approximately $6,760,000 US) in
term and overdraft borrowings secured by ISP's property and equipment and is
partially guaranteed by the Company. Interest on the facility is payable at
rates ranging from 3.5% to 6.75% and the loans are repayable in monthly
installments over a period of five to ten years. In conjunction with the
refinancing, the Company was able to reduce its guarantee of ISP's debt from
S$5,000,000 Singapore dollars (approximately $2,830,000 US) to S$4,000,000
(approximately $2,260,000 US). The reduced guarantee is secured by a standby
letter of credit of up to S$4,000,000 issued by PNC Bank in favor of ISP's
lenders which is subject to renewal as of September 2002. In July of 2002, the
Company issued instructions to PNC bank to renew this standby letter of credit
in preparation for September renewal date. In the event of default, as defined
by ISP's lending agreements, or in the event the Company is unable to renew the
standby letter of credit by September 2002, Keppel Tatlee Bank could draw down
the S$4,000,000 standby letter of credit provided by the Company's Bank, which
would have a material adverse impact to the Company.

PREFERRED STOCK ISSUANCE:

On June 1, 2000, the Company received $10,000,000 in gross proceeds from the
issuance of Series B Redeemable Preferred Stock ("Preferred Stock") to a group
of investors led by ACI Capital Co., Inc. ("ACI investors"). In connection with
the issuance of the Preferred Stock, warrants ("Warrants") to purchase one
million shares of the common stock of the Company were issued to the ACI
investors. The Preferred Stock is subject to mandatory redemption on May 31,
2005 and cash dividends are payable semi-annually at a rate of 6%, subject to
rate increases up to 18% in the event of a triggering event as defined in the
Preferred Stock.


                                      -15-
<PAGE>


To avoid the possibility of there being a current or a future triggering event
under a certain financial covenant provision of the Preferred Stock that would
allow the ACI investors to call for immediate redemption of the Preferred Stock,
the Company and the ACI investors entered into an agreement on November 13, 2001
that was amended and restated in its entirety on March 29, 2002. The Restated
Agreement provided, among other things, that: (i) the redemption price for the
Preferred Stock would not in any event be due prior to January 3, 2003, (ii) any
increase in the dividend rate to which the ACI investors might otherwise be
entitled to would not go into effect prior to January 3, 2003 and (iii) Section
14.1 of the Warrants that now provides that the Company would be obligated to
purchase the Warrants (at a price which would provide the ACI investors with a
20% internal rate of return calculated from the date of issuance of the
Preferred Stock, after taking into account dividends theretofore paid to the
holders of the Preferred Stock and the value determined, as provided in the
Warrants, of the shares of common stock of the Company, if any, issued pursuant
to any exercises of the Warrants by the holders of the Warrants) upon a change
of control pursuant to the formula therein set forth (the "Warrant Repurchase
Agreement") was amended to apply also to a Bankruptcy event as therein defined.
In addition, the Warrant Repurchase Formula would not apply to any redemption of
the Preferred Stock unless, for calendar year 2002, there was no period of
twenty consecutive trading days for which the daily market price of the
Company's Common Stock was greater than $5.00 per share, and (iv) additional
warrants to purchase 250,000 shares of the Company's common stock were granted
to the ACI investors, with an exercise price of $3.00 per share. During March
2002, the Company notified the ACI investors that it had elected to pass on the
semiannual dividend due March 31, 2002 as is permitted one time without penalty
under the Preferred Stock agreement.

On May 20, 2002, the Company and ACI entered into an additional agreement that
provided that: the redemption price for the Preferred Stock would not in any
event be due prior to April 1, 2003. On July 17, 2002, ACI provided a standby
letter of credit of $250,000 as additional collateral required for the Company's
Gold Consignment Agreement with FPM. Due to the recent trading level of the
Company's common stock and the significant uncertainty about the Company's
future liquidity, management has concluded that it is reasonably probable that
the above mentioned Warrant Repurchase Formula will apply and has accrued an
amount through June 30, 2002 of $3,175,000 pursuant to the formula.

DISCONTINUED OPERATIONS:

The Company completed the sale of the assets of its ASP US business to Rockwood
Specialties on February 28, 2002 for gross proceeds of approximately $6,100,000
plus the assumption of certain liabilities by the purchaser. $1,300,000 of the
proceeds were used to pay down term debt outstanding under the PNC Term Loan
Facility and the balance after severance and professional fees was used to pay
the revolving credit borrowings. On May 2, 2002, the Company completed the sale
of the stock of ASP BV for cash proceeds of approximately $1,100,000 which were
used to pay revolving credit borrowings. The Company is in discussions regarding
alternatives for its 50.1% interest in Singapore based ISP including a transfer
of its obligation to provide a standby letter of credit as described above.
Management of the Company believes that the remaining ISP subsidiary has
sufficient liquidity from operations and banking facilities, such that no
additional funding from continuing operations is anticipated.

OTHER:

In conjunction with the Company's acquisition of Polese Company, on May 27,
1993, the Company acquired from Frank J. Polese, the former sole shareholder of
Polese Company, all of the rights, including a subsequently issued patent, for
certain powdered metal technology and its application to the electronics
industry. For a period from May 1993 through the expiration in December 2002,
Mr. Polese has the right to receive a portion of (i) the annual pre-tax profit
from the copper tungsten product line, after allocating operating costs and (ii)
the proceeds of the sale, if any, by the Company of the powdered metal
technology. During 2002, the Company has recorded no charges against operations
under this agreement.


                                      -16-
<PAGE>

OUTLOOK:

The Company may need additional cash to meet its working capital needs until
revenues increase and a return to profitability is achieved. While there is no
assurance that funding will be available to support future liquidity needs, the
Company is in preliminary discussions with lenders to refinance its existing
credit facilities prior to the October 31, 2002 expiration date and is better
collateralized due to reductions of $2,900,000 in bank and capital lease
obligations.

In the event that both short and long-term support from its current lenders and
Preferred Stock investors or replacement lenders is not available, the Company
is exploring alternatives. The Company has hired professional advisors to assist
with these efforts that could include, but are not limited to, strategic
combinations, additional equity investors, alternative lenders, and selling
substantially all of the Company assets.

Management believes that despite the financial uncertainties going forward it
has valuable manufacturing processes and technology and that it is capable of
profitability provided that sufficient liquidity is preserved. The support of
the Company's vendors, customers, lenders, investors, stockholders and employees
will continue to be essential to the Company's future success.


FORWARD-LOOKING STATEMENTS:

Portions of the narrative set forth in this document that are not historical in
nature may be forward-looking statements. These forward-looking statements speak
only as of the date of this document, and the Company expressly disclaims any
obligation or undertaking to publicly release any updates or revisions to any
forward-looking statements contained herein. The Company's actual performance
may differ materially from that contemplated by the forward-looking statements
as a result of a variety of factors that include, but are not limited to, the
general economic or business climate, business conditions of the electronic,
microelectronic and semiconductor markets and the automotive and communications
industry which the Company serves, the disposition of the discontinued
operations and the economic volatility in geographic markets, such as Asia and
the ability of the Company to meet its capital requirements and to maintain
compliance with NASDAQ listing qualifications.


                                      -17-
<PAGE>


PART II.  OTHER INFORMATION

Items 1. - 6. Exhibits and Reports on Form 8-K


10.1 First Amendment to Gold Consignment between the Company and Fleet Precious
     Metals dated July 17, 2002

10.2 Second Amendment to Gold Consignment between the Company and Fleet Precious
     Metals dated August 15, 2002

99.1 Certification under section 906 of the Sarbanes-Oxley Act of 2002.


                                   SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.


                                SEMX CORPORATION

    Date: August 21, 2002                 By: /s/ Gilbert D. Raker
                                          ------------------------

                                   Name:  Gilbert D. Raker

                                   Title: Chairman of the Board and acting
                                          Chief Financial Officer

    Date: August 21, 2002                 By: /s/ Frank J. Polese
                                          -----------------------

                                   Name:  Frank J. Polese

                                   Title: President and Chief Executive Officer



                                      -18-